… the venture capital business is 100 percent a game of outliers, it is extreme outliers… We have this concept, invest in strength versus lack of weakness. And at first that is obvious, but it’s actually fairly subtle. Which is sort of the default way to do venture capital, is to check boxes. So “really good founder, really good idea, really good products, really good initial customers. Check, check, check. Okay this is reasonable, I’ll put money in it.” What you find with those sort of checkbox deals, and they get done all the time, but what you find is that they often don’t have something that really makes them really remarkable and special. They don’t have an extreme strength that makes them an outlier. On the other side of that, the companies that have the really extreme strengths often have serious flaws. So one of the cautionary lessons of venture capital is, if you don’t invest on the basis of serious flaws, you don’t invest in most of the big winners.

November 30, 2018 Posted by David GreenwoodExcerpts
0 thoughts on “On Overconfidence Being a Bigger Problem than Incompetence”

We all spend a lot of time complaining about incompetence, but as Malcolm Gladwell pointed out in a talk he gave at High Point University, overconfidence is the far bigger problem. Why? Incompetence is a problem that inexperienced people have, and all things being equal, we don’t entrust inexperienced people with all that much power or authority. Overconfidence is usually the mistake of experts, and we do give them a lot of power and authority. Plain and simple, incompetence is frustrating, but the people guilty of it usually can’t screw things up that bad. The people guilty of overconfidence can do more damage.

Emotions get people to change their behavior. In his show Crowd Control, Dan Pink tried to get people to stop illegally using handicapped parking spots. When Dan’s team changed the handicapped signs so they has a picture of a person in a wheelchair on them, illegal parking in the spots didn’t go down — it topped altogether. Seeing a person’s face, thinking about how someone else might feel, made all the difference.